Prestigious universities face a £40m funding cut under government-backed plans to scrap a budget that pays for the maintenance of their historic buildings.

Oxford, Cambridge and King's College London will be worst affected by the proposals, which are part of savings being made to reduce the government's universities budget in preparation for a downturn in public spending.

The universities will have to find new funding for the specialist upkeep of the historic buildings that dominate the landscape of Oxford, Cambridge and parts of central London. The plan is expected to be passed within weeks by the universities funding agency.

This year Oxford received £5.14m to help maintain their landmark buildings, which include the Bodleian library, built in 1602, and the Sheldonian theatre, which followed a few decades later designed by Christopher Wren. A spokesman for Oxford University said: "Any reduction in funding is a serious concern and we are talking to Hefce [the Higher Education Funding Council for England]."

Cambridge received £4.2m and King's College London £2.2m. King's owns the Maughan library on Chancery Lane and a Grade I listed chapel, part of its campus on the Strand.

Manchester, Leeds, Liverpool, Bristol and Newcastle all stand to lose more than a million pounds a year each in the cuts. University College London, which received £1.5m this year, said it had asked Hefce to phase the cuts in to allow it to find new sources of funding. "Obviously we would prefer not to lose the money," a spokesman said.

In May, the then universities secretary, John Denham, asked the funding council to find £180m savings in 2010-1. This year's budgets have also faced a £65m cut.

The cuts to the historic fund would save £40m and Hefce is also proposing to end a budget that made £24m in additional payments to universities that offer two-year foundation degrees and a further £24m from spending on a premium for fast-tracked postgraduate courses in arts-based subjects.

Hefce said the plans were in response to the order by Lord Mandelson, the current secretary of state responsible for universities, to make savings.

A spokesman said: "While it may be true that these [historic] buildings require some form of public funding, it is not clear that this should be through the teaching grant."

Mandelson is due to announce a plan for the future of higher education within weeks that will set out future ways to fund the sector. He will also launch a review of student funding which will consider whether to change the system of top-up fees and how much students should pay towards their degrees.